The Golden Buyer, Last in series Golden age of the buyer

These farmers have chiseled out new ways to get products, services and information for their farms. And they are enjoying better pricing, selection and service because of it.

They're informed. They're demanding. They know what they want. And they expect to get it from their ag suppliers. If they don't, they'll buy elsewhere. Nothing personal. Just business.

These are the farmers who, either by the sheer size of their acreage or their technical ingenuity, have shaken up the traditional channels of distribution and witnessed better ways of buying products as suppliers struggle to secure their business.

Lower pricing, wider selection, better service and more access to information are all common story lines in what has been labeled the "golden age of the buyer." And the buyers who have lived it say all farmers will eventually benefit, provided they are willing to make some changes.

Here are six Golden Buyers who have experienced changes in business structure firsthand.

Art Andersen remembers a time when his family bought seed corn from a neighbor down the road, sold their grain at an elevator a mile away and bought their chemicals and herbicides there, too.

All that has changed. Andersen Farms has grown at a tremendous pace in recent years, now stretching across eight counties in South Dakota. With that growth has come more sophisticated management.

"Buying from the person closest to you was not an efficient system," Andersen reflects. "There were too many people in between us and the company, and too much profit expected and being pulled out. We've just gradually eliminated steps and people and businesses in the processes in the way we buy."

Andersen now only deals directly with higher-level people when making purchases. And he is able to negotiate private individual deals that result in better service and lower prices than what he was getting before.

"We are not going to go to a salesman that goes to a regional district salesman that goes to a company supervisor that goes to a manager," he says. "I'm not going to do that. I'll buy someplace else."

How did he make that transition?

First off, Andersen knows what products he wants. He views his farm as one giant test plot to find out what products work on his farm. He also exchanges information with other growers with large operations like his to see what works for them.

As a result, he no longer has to rely on local salespeople for advice. "That may be the most important aspect in all of this," Andersen says. "We know the product we want. We don't want variety selection advice and some of the common sales pitch information. We don't need that."

Second, Andersen has a minimal need for service because they do most of the work themselves.

"We scout our own fields, know our own weeds, know our own treatment, know the rates, know the application techniques. It is our business to know that," he says.

Third, he is set up to handle and store direct shipments of product any time during the season.

For example, he has facilities to store seed from the time he buys it in February to the time he plants it in May so he doesn't have to buy it at the local elevator and have the elevator hold it.

Andersen says suppliers have targeted him and others like him for sales because they have found they can sell more product with less hassle by dealing directly with only a few large farms.

"They are studying our patterns or methods to figure out how to market to everybody," he says.

"And the smaller guys will benefit very soon from what they are learning from dealing with us."

For example, he says prices may be lower because sales margins will be slimmer. And service may be better, too, as farmers who subscribe to the Internet will have direct access to higher-level people. "The Internet and e-mail are a powerful thing," he says.

Andersen says the new business structure emerging won't be for everyone. "But possibly the guys that it doesn't fit will be forced to operate in a way that does fit."

Don Villwock found out early that the cheapest price isn't always the best deal. So he defines himself as a service shopper for 80% of the products he buys.

His suppliers have keyed into that fact and, for the past two to three years, have presented Villwock with more personalized options.

For example, he owns his own sprayer and applies chemicals himself. "We look at safety and drift," Villwock says. "Those are the issues we are concerned about when we apply our own versus if we let the dealer have those liabilities. So they address those with us along with application and mixing techniques."

Villwock also has witnessed better service from his local Pioneer seed dealer as the company strives to provide extensive training for its local sales representatives. "Larger companies' farmer-dealers are evolving into full-time professional seed salesmen that spend quite a bit of time just knowing the product, studying the product and helping me as a producer to buy the right product for my farm," Villwock explains.

These new dealers are able to give better advice because they are exposed to more plot data and agronomic research and many are trained Certified Crop Advisors. For those products that do not require a lot of service, Villwock is willing to take a look at pricing opportunities by buying direct. For example, he recently placed a bid on the Web site XSAg.com for Roundup herbicide for $0.28 versus the $0.33 or $0.36 that dealers in his area were asking.

"I don't expect too much product support from the company, because they are not compensating their fieldmen or retailers for it," he says. "Whereas when I buy from a retailer, for that margin they mark it up, I expect some service."

Like most farmers, Mark Schneider has felt the effects of $4.50 beans and $1.50 corn and has had to struggle to make a profit. What's more, Schneider also raises dairy cows. And he knows he is headed toward one of the worst price slumps for Grade A milk in 25 years.

These conditions have forced Schneider to buy products based on price. For that reason, he has been purchasing directly from the manufacturer whenever he can, and he has been using the Internet to do it.

He says the Internet has expanded his base of suppliers. "No longer are you restricted to your local area because you can go on the Internet," Schneider says. "If you don't see the thing you want to purchase, search for it. Somebody somewhere has got it for sale."

Last year, for instance, he saw an advertisement in a magazine for XSAg.com, an auction Web site for manufacturers, distributors and dealers to sell chemicals, seed and other ag products to farmers nationwide. Schneider used a "reverse auction" feature that allowed him to post the product he wanted to buy and the price he wanted to pay delivered to his farm gate.

Schneider got a response in less than a day from a supplier willing to meet his price, which was 20% less than what was quoted by all three of his local suppliers. "I was excited to see how it was going to work the first time," Schneider says. "And when the chemical showed up on the truck, it was exactly as if I had gone to the local dealer and picked it up."

Schneider also has used the Internet to purchase a corn silage inoculant at a discounted price.

Using the Yahoo search engine, he typed in "silage inoculant." The brand that came up was by CR Hanson. He went to the Web site listed and left his e-mail address and phone number. A few days later a representative contacted him by phone and put him in contact with a dealer in Texas.

The product wound up costing him $0.67/ton versus more than a $1/ton to treat. "They put the order in on a Friday, and UPS pulled in our driveway on 10:00 Tuesday morning, right after Labor Day," Schneider says. "So, with the holiday and weekend, that was pretty good service."

Ken Less Merrill, IA Operation: Grows corn and soybeans in three counties and two different states; also raises hogs Buyer type: Service-driven Buying strategy: Works with high-level service representatives

Service is of utmost importance to buyer Ken Less. Especially now. In the last four years, he has doubled the number of acres he farms. "So I have to depend more on service," Less says. "I can't do it all myself." Suppliers are responding to his need by giving him access to people higher up the management chain. This year, Novartis assigned a district representative to work with him, who Less says is better trained and has more knowledge than local reps. The district representative has met with him twice al-ready this year: the first time to assess his needs, and the second time to come back with hybrid recommendations that would work on high pH soils and cool, wet ground. "He came up with some real good ones that I was kind of impressed with," Less says. "Now I'm supposed to think it over and see if it matches with what my needs were." Implement dealers also are making strides to better serve Less. In the past two years, both Caterpillar and Deere have given him the opportunity to test drive new equipment for more than a day instead of the usual 15-min. test drive.

One product was a John Deere sprayer. Less drove the sprayer for a day, and afterward the dealer asked him what he liked and didn't like. The following year Less bought the sprayer and noticed that many of his suggestions were adopted. He says, "I was kind of impressed that they actually listened to people in the country."

Ken Rulon Rulon Enterprises Cicero, IN Operation: 5,500 acres of corn and soybeans and 600 sows Buyer type: Price-driven, but willing to pay 1 to 2% more to get it locally Buying strategy: Pays 1 to 2% over distributor price

Ken Rulon flashes back to a meeting held last summer in Wisconsin. The president of a well-known chemical company was speaking to a group of growers with large operations. He was explaining that the reason the company could not sell directly to farmers was because trucking issues would be a nightmare.

So Rulon took a quick poll. He counted 172 semis that were owned by the farmers in the room.

"Trucking is not an issue," says Rulon. "We can pick up the product ourselves in St. Louis. We'd have to solve some liability problems. But it is this thinking that we are locked into this way of doing things that is going to have to come tumbling down or the Internet is going to tumble it down."

Rulon is unwilling to settle for the current distribution channel in agriculture. And he is doing his part to change it by arming himself with market intelligence.

He belongs to a peer review group of about 11 Indiana farmers who together represent 70,000 acres. Using e-mail, they exchange prices they are paying for inputs and then leverage that knowledge when dealing with suppliers.

"I know the three or four farmers who are paying the least amount for chemicals in the state," he says. "Every year, I find out what they paid for product. If I pay a few percent more, then I know I'm okay."

As a general rule, Rulon will pay 1 to 2% over the distributor price just to be able to buy the product locally. If he can't get that, he takes his business elsewhere. "What we have told the local people we buy from is that you are going to have to be competitive with direct or we will have to go around you," Rulon says.

Each time he buys product, he sends a request for bids to three or four suppliers and states a deadline for response. He accepts bids only from his list of preferred suppliers. The company that comes back with the lowest bid gets the business.

"We don't nickel and dime them after that," he says. "We try to negotiate with integrity. I don't then take that price and use it to deal with the next dealer."

He has successfully used this strategy to negotiate a deal to buy Pursuit at a deeply discounted price than what local dealers offered. He arranged the deal with a large distribution company that allows him to buy the product on a different price schedule through one of its retail outlets. He says this distribution house is a good example of how a company can adapt to the reality of the marketplace.

"I think the real example will be when a distribution company like Wal-Mart decides to distribute the products of this industry the right way. Where I can dial up Wal-Mart and all the prices are right there. If you want to take 40,000 lbs. of Lorsban, it is $1.45 delivered cash."

Rulon says some company will do just that in the next five years. However, that company will first have to figure out how to manage freight.

"It's just like delivering corn," Rulon says. "Freight is a bigger issue than the price. If you can't drive there in a semi, the price becomes irrelevant because you just can't get there."

Kevin Kimberley is a first-generation farmer who entered farming the hard way. Instead of inheriting the land and machinery he needed to get started, he had to buy it. And he is the first to admit that he doesn't have all the answers.

That is why information is of utmost importance to him. "I think you ask more questions when you come up the tough way, because there's no room for mistakes," he says.

To get those answers, Kimberley surrounds himself with intelligent people who have access to the best information. For example, when shopping for inputs, he bypasses the local salesperson and goes directly to the district representative. How does he do it?

"I'm kind of a demanding person," he explains. "And I usually demand to talk to them. Most people think they are not supposed to. But that is why they are hired. If you have a problem in your cornfield, they may show you what has happened and why it happened. And that is how you learn."

He also attends a lot of specialty meetings hosted by companies. For example, Novartis Crop Protection, Novartis Seeds, ConAgra and Case IH recently selected Kimberley to be a part of an Ag Innovation Group, a group of 90 top farmers from across the country. The farmers meet every quarter to discuss a range of topics, including genetically modified crops, the future of farming, overseas markets and site-specific farming.

"There are several of us who talk on the phone once a month," he says. "We know what is going on all over the U.S. now. We know about deals that are being done." He says the companies hosting the groups also learn a lot. Representatives from each company attend and take notes. They use the information to determine what products and services farmers will need. He says their involvement will help make the whole business of farming work better.

"You have the chemical people in there, the equipment people and the food people, and they are all looking to how we can make this thing more profitable," he says.

"For instance, there can be insulin corn in the future that could go in the middle of Healthy Choice. Vitamin E is a big healer. This could be in your cauliflower, broccoli or in your corn tacos in the future. These are things that aren't that far away."

We asked these Golden Buyers how other farmers can get the same level of pricing, service and information that they have found. Here's what they said:

*Expect to change your process of thinking and buying. For example, you may not be working with local salespeople as much. Art Andersen says, "Your deals are not going to be cut on the kitchen table over a cup of coffee anymore." *Become an attractive buyer to suppliers on your own level, whether it is based on the size and quality of your operation or your professionalism. *Get up to speed on what products you want. Find out what works by doing test plots or networking with other farmers. This reduces your reliance on product selection advice and service from dealers. *Ask to deal with a high-level person at a company who can make the decision about a purchase. *Get set up to handle direct shipments. For example, you may need to put up certified storage facilities to store bulk shipments of product, buy a forklift to receive pallets or buy a sprayer to apply your own chemicals. *Ask to meet one-on-one with a company agronomist to get him or her to talk candidly about what seed or seed and chemical combinations will work best on your farm.nBuy a computer. *Learn to use it. *Get on the Internet. Research the topics that interest you to stay abreast of what is happening in agriculture. *Get on the e-mail lists of other farmers and experts in the field. *Communicate and share information with other farmers. "Large farms freely exchange information with other large farms," Andersen says. "They do not have the paranoia about being able to compete. They're there. They're doing it." *Form your own peer review group with growers who are of similar age and who have similar farms to exchange input pricing information. Then leverage that knowledge base when negotiating product purchases. *Go to specialty meetings attended by other top farmers. *Go to farm shows. Visit the booth that has the product you are interested in. "Tell them you'd like to have someone come and visit," Villwock says. Or ask questions of other farmers who have already bought the product. nCall, write or e-mail your retailers or wholesalers and make it known that you are interested in their products. *Develop a list of preferred suppliers that have a reputation that warrants your trust. *Request competitive quotes from three or four suppliers and give them a deadline for response. *Ask companies to price their products based on the level of service you want. *Take a class on how to negotiate. *Determine what percentage over the distributor price you are willing to pay in order to be able to buy locally. *Don't be afraid to ask stupid questions. *Ask hard questions. *Get up and walk out when negotiating to buy something. "I guarantee you, farmers never do that," Rulon says. "It never happens. But you will probably save 5% right there. But do it with integrity. Do your research to find out if he is price competitive, and if he is, don't do it to him."